"Let Me Start" tonight with this. The biggest mistake you can make is
thinking that this is the end of it. The angry right led by Senator Ted
Cruz and Mike Lee and whatever posse is joining them are ready to do it all
again -- and again and again. Cruz is blaming his fellow Senate
Republicans.

Far bigger is the relentless onslaught of anger against the president,
the Affordable Care Act, and all things Obama. For that, the course is now
set, a huge fight over the budget heading into the week before Christmas,
another government shutdown looming early in the new year. Finally,
another debt ceiling the month after that. Expect this fight against Obama
to barrel all the way until 2016.

For his enemies, the demolition of this president remains their most
exciting quest. They call it the cause. Its battle flag is the stars and
bars, its religion the notion that somehow, the minority who back Cruz and
Lee and the rest are the real Americans. That`s their job, to take it back
from the other, those people who live in big cities, minorities and
liberals and others who to them constitute the enemy.

Be warned. With every fresh defeat, this crowd becomes more
frustrated, more angry, dismayed that (ph) they, who are the true, indeed,
super-Americans, assume their votes should count more than those lesser
folk they think are lesser who voted for the president.

How else do you explain that a group that`s outnumbered at the polls
again and again should call itself, as it does so predictably, the American
people?

Joining me now is editorial director of the Huffington Post Media
Group Howard Fineman, and "Washington Post" opinion writer Jonathan
Capehart. Both are MSNBC political analysts, of course.

But first tonight, gentlemen, a little comic relief following more
than two weeks of dysfunction. In a comparison pointed out by conservative
writer John Podhoretz, a favorite of mine, he called it the "Animal House
shutdown," complete with senators Ted Cruz and Mike Lee playing the roles
of Otter and Bluto in this great misguided call to arms.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We got to take these bastards. Now, you could
fight them with conventional weapons. That could take years and cost
millions of lives. No, in this case, I think we have to go all out. I
think this situation absolutely requires a really futile and stupid gesture
be done on somebody`s part! And we`re just the guys to do it.

(END VIDEO CLIP)

MATTHEWS: Howard, a real futile gesture.

(LAUGHTER)

MATTHEWS: What have these two weeks accomplished for anybody on this
planet?

HOWARD FINEMAN, HUFFINGTON POST MEDIA GROUP, MSNBC POLITICAL ANALYST:
Chris, I should point out that at the end of the movie, they show that
Blutarski there becomes a United States senator. I don`t know if you
remember that.

FINEMAN: OK. It`s perfect. Well, first of all, I think, as funny as
that was, there`s nothing to laugh at here. I think this is the beginning,
among other things, of a real grass roots civil war in the Republican
Party.

You saw today that the -- Ted Cruz and his allies went after Senator
Thad Cochran of Mississippi, who voted for the Reid/McConnell deal. And
they`re going to support the Tea Party challenger down there.

I think Mitch McConnell himself is going to have stepped-up antagonism
from the Cruz faction. And I think one of the things that`s going to
happen between now and 2016 is a real ground war led by the Cruz people
against anybody who disagrees with them.

So their -- part of their mission is not only to point to those
moments that you`re talking about come December, January and February,
they`re in this for the long haul and they`re looking to take over the
Republican Party.

MATTHEWS: But their -- let me go to Jonathan on this. But their
fuel, what angers people, the hatred of Obama is the fuel for their
engines. They may be going after what they call moderate or chicken
Republicans, but they`re really running on the fuel of hatred of Obama,
hatred of "Obama care," if you want to call it that, hatred of anything
with his name on it, with it marked (ph) on his jersey, anything they can
tie to him, any vote.

CAPEHART: Right. Absolutely. You know, I wrote a piece yesterday,
"the irrational fear of President Obama," And it was based on an interview
that our colleague, Stephanie Cargill (ph), and I did with a man by the
name of David Jackson (ph) in Belmont, North Carolina. And we were there
to talk to them -- to talk to people in Belmont about what they knew about
"Obama care" and what they didn`t.

And just asking him about "Obama care" led us down this sort of rabbit
hole of conspiracy and fear of the president that when you read the
transcript -- portions of the transcript that I put in the piece, it`s --
I`ve heard people say, It`s scary, It`s mind-boggling, What world are these
people in? But they firmly believe that the president is out to destroy
the country.

MATTHEWS: OK...

CAPEHART: They don`t trust him, and they support folks who support
their viewpoint.

MATTHEWS: Jonathan, take this carefully -- I mean it carefully. Just
imagine we had an African-American president who did three things. He
doubled the stock market, took the Dow to double where it was when he came
in, he went out there almost in a fever pitch, killing our enemies in the
world using all modern technology to do it, not listening to the left who
complain about it, the pooh-pooh, going out there and killing all our
enemies with drones or whatever missions he can use, using SEAL teams,
whatever, to do that that the guy before him couldn`t do, and he used the
Republican plan on health care, the Heritage Foundation plan, which was
pushed a bit to the right of Nixon.

Do you think they would applaud that? I`m just being sarcastic
because that`s what he did.

CAPEHART: Right. Of course they would applaud that. And I just
should point out, Chris, that David Jackson in North Carolina told me he
does not believe that Osama bin Laden is dead. He does not believe that
the United States, on orders from President Obama, actually killed
America`s number one enemy.

MATTHEWS: And what does he think happened? We just -- he`s --
Obama`s (sic) cooperating with us in some way by acting dead?

CAPEHART: You know, I just -- I couldn`t explain it. I just asked
the question.

MATTHEWS: So the medical team...

CAPEHART: He gave me an answer.

MATTHEWS: ... on the boat -- ship bringing him home, before they
buried him at sea under Islamic law, did everything right by his religion -
- did those people lie? They all lied?

CAPEHART: Yes, no, they -- they -- I can`t explain where he got that
from or why he even said that.

MATTHEWS: Well, anyway, the Republicans are already itching for the
next fight, of course. And their target dates have now been set with the
passing of the continuing appropriations act. January 15th is when they
can fight again over shutting down the government, of course, their
favorite cause now. And the debt ceiling that has to be raised through --
by February 7th, giving them another date to which they can threaten the
U.S. and world economies, of course.

Here they are, by the way, putting it on their game face -- putting on
their game face.

(BEGIN VIDEO CLIP)

REP. JOHN FLEMING (R), LOUISIANA: So we`re going to continue to stand
up for our values that we have all along.

QUESTION: What does this mean for the future of the Republican Party?

REP. MICHELE BACHMANN (R-MN), FMR. PRES. CANDIDATE: It means that
we`re doing exactly the right thing. We`re choosing the right areas to
advocate on for the people of the country. And we`ll continue to do that.

REP. TIM HUELSKAMP (R), KANSAS: We took a charge at this and then we
fell short. But you know, I think, we lost the battle, but we`re going to
win the war over "Obama care."

(END VIDEO CLIP)

MATTHEWS: Sometimes you think it`s the battle of Gettysburg still on
here.

Anyway, Senator Ted Cruz, who often seems to operate in his own
private universe, alternative reality, of course, spoke on the Senate floor
yesterday about what the world might be like if it only were as he imagines
it. Let`s listen.

SEN. TED CRUZ (R), TEXAS: I would ask you, Mr. President, to imagine
a different world. Mr. President, I ask you to imagine a world in which
Senate Republicans united to support House Republicans. Imagine that one
piece being different from what we saw. Imagine, after the House
Republicans stood together with the American people, if all 46 Senate
Republicans had stood together and said, We are united against the train
wreck that is `Obama care.`"

And I want you to imagine, Mr. President, if Senate Republicans had
stood tougher and simply supported House Republicans and the American
people. Mr. President, if that had happened, this result, I believe, would
have been very, very different.

(END VIDEO CLIP)

MATTHEWS: Howard, it`s exactly your point. He`s making war against
his fellow Republicans using the fuel of anger against Obama. But you`ve
been around, like I have, for a while. That`s a strange use of the Senate
floor.

I mean, the area`s on the Senate floor, which is supposed to conduct
the business of the people as Americans, and he`s operating like he`s in a
Republican counter-caucus, some town meeting. He talks like he`s at a town
meeting. He`s blasting away at his co-partisans, his fellow members of the
Republican Party, using the Senate floor to do it.

I just think that`s strange. I mean, I`ll just say it`s unusual to do
it.

FINEMAN: No, I agree with you, Chris, that that`s one of the striking
things about it. But Ted Cruz brings his mental town hall, his mental
congregation, if you will -- and I think there`s a sort of religious tone
to a lot of what he does. He brings that with him wherever he goes. It`s
a portable construct that he`s got everywhere, whether he`s speaking to a
bunch of reporters outside the Senate or on the floor or the Senate, or
anywhere, utterly political, utterly militant, utterly focused.

And their goal -- the goal of his and of the people who are around him
is nothing less than a takeover the Republican Party from the inside, if
they can, or the destruction of it from the outside, if they can`t.

And I think that every -- almost -- well, first of all, any Republican
senator who`s up for reelection who supported the Reid/McConnell deal of
the other night is going to face a well-financed -- well-financed challenge
with money channeled via Ted Cruz and his allies, who include Jim DeMint of
Heritage, who include the Koch brothers. I mean, they`re out -- they`re
out for blood here.

FINEMAN: It -- it -- they`re going to do the purge if they can. They
have nothing but contempt...

MATTHEWS: Yes.

FINEMAN: ... for people that they view as sort of accommodationists
who are in league, either deliberately or by -- or -- or by neglect, with
Barack Obama.

MATTHEWS: Well, President Obama admonished defeated Republicans today
that breaking our system of government is not the way to make change -- not
breaking it, helping it. And he had a suggestion of how they might one day
get what they want. Let`s listen.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: You don`t like a
particular policy or a particular president, then argue for your position.
Go out there and win an election. Push to change it. But don`t break it.
Don`t break what our predecessors spent over two centuries building.

(END VIDEO CLIP)

MATTHEWS: You know -- you know, sometimes, the president isn`t at his
best. He was today. And I thought -- Jonathan, I thought that, Go out
there and win an election, is the most healthy charge to your opponent I`ve
ever heard. You want to fight, let`s fight clean. Let`s go the polls, get
some people to work with me, raise some money, run for office, give the
speeches and win one time.

You can`t beat me in elections. You know, I play by the Marquess of
Queensberry rules. I go out there and debate (INAUDIBLE) lose one debate,
win two other ones. But at least I`m running. What are you guys doing?
What you`re doing is waiting until we need the debt ceiling passed and
trying to screw the country to get what you want -- kidnap it, if you will,
extortion. Why don`t you play fair?

I mean, I really think it comes down to that. It`s not illegal, what
these guys have done. We know that.

MATTHEWS: But it breaks the rules of normal political debate and
decision making because if everything is like this, it`s going to get
worse. It`ll always get worse, if you keep going the direction that the
Cruz is taking everybody.

CAPEHART: Right. It breaks the rules of governance. Look, in that
clip you just showed, that`s the president talking about what just happened
over the last few months from the 35,000-foot level.

But what he said there is what he was saying in a more granular
fashion when it comes to the Affordable Care Act. As he said in several
interviews, I believe also with our colleague, John Hardwood, the
Affordable Care Act, "Obama care" was passed by both houses of Congress,
signed into law by the president, upheld -- challenged in the Supreme Court
and upheld by the Supreme Court, and then ratified by the American people
vis-a-vis the 2012 presidential election, where the Affordable Care Act and
its repeal or staying in place was the central -- one of the central themes
of the campaign.

And yet, as you said and as we all know, you had a narrow band of the
majority pushing a no-win strategy to convince this president to do away
with, to defund, delay, and repeal his signature legislative
accomplishment.

And as we all knew going into this, if that`s what the Republicans
want to do, then they`re going to need to take over the Senate in 2014 and
the White House in 2016.

MATTHEWS: And the first step towards that is taking down the
Confederate flag from their political rallies. I think that would be a
good start for everybody.

CAPEHART: Absolutely.

MATTHEWS: Howard, thank you so much, Howard Fineman.

FINEMAN: Thank you.

MATTHEWS: I think you got the nail here, it`s to hit the other Russia
using Obama`s fuel to hit them with. Jonathan Capehart of "The Washington
Post," thank you so much.

Coming up: So what do Republicans get out of all this? Changes in the
Affordable Care Act? No. Reduced spending? Not at all. Publicity for
the bad "Obama care" rollout? Improved poll ratings? Better positioning
for 2016? All no, no, no. Let the battle between mainstream Republicans
and the red (ph) hats (ph) begin because it already has. Howard`s reported
that.

MATTHEWS: Cory Booker will be sworn in as the new U.S. senator. The
Newark mayor beat his Tea Party challenger last night in New Jersey`s
special Senate election to fill out the term of the late, great Frank
Lautenberg. Booker took 55 percent of the vote in a very low turnout
election. His opponent, Steve Lonegan, got 44. Booker will have to run
for reelection next year, but it looks like he`ll do it well.

We`ll be right back.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL. In Washington, we`re used to
conflict between Republicans and Democrats, of course. But what we`re
seeing now is a civil war within the Republican Party, between Tea Party
and non-Tea Party Republicans.

Well, the wounds and the divisions are deep, and the tone`s getting
worse, of course. Here was right-wing radio host Rush Limbaugh today --
actually, yesterday.

RUSH LIMBAUGH, RADIO TALK SHOW HOST: The Republicans agreed to tie
one hand behind their back because of Obama`s race! They had the other
hand tied behind their back by this trick that got them to shut up!

I was pondering if I can ever remember a greater political disaster in
my lifetime, if I could ever remember a time when a political party just
made a decision not to exist, for all intents and purposes!

(END VIDEO CLIP)

MATTHEWS: Well, but the reasonable and responsible right in the
Republican Party is fighting back against the Limbaugh, Cruz and Jim DeMint
crowd. This is what a few non-Tea Party Republicans said about the damage
done to the country and to their party.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: It was a fool`s errand, and that`s why
some of us became so angry.

QUESTION: Do people realize that the strategy didn`t work the way
they wanted it to?

REP. PETER KING (R), NEW YORK: Some say it worked perfectly. It
depends on what echo chamber you`re living in.

REP. AARON SHOCK (R), ILLINOIS: So I would hope that we learn from
the past and employ different strategies and tactics that maybe would be
more successful in the future.

Former U.S. congressman Steve LaTourette of Ohio is a good friend of
Speaker John Boehner`s and Kathleen Parker`s a great columnist for "The
Washington Post."

Thank you, gentleman and lady, for joining us. And I guess I want a
sense -- and I`m going to actually withhold my comment for 20 minutes here
or so, as long as you`re on the air -- maybe not that long, but as long as
you`re here -- and just hear from you folks because you probably know more
about this issue than I do.

How goes -- Kathleen, how goes the Republican Party in the aftermath -
- the afterglow for some -- of this big fight?

KATHLEEN PARKER, "WASHINGTON POST": Well, it`s definitely not an
afterglow in the Republican Party. But you know, there are those who would
argue that this has been, ultimately, a fight that the Republican Party had
to have, and that in the long term, it`s actually probably something good.

And by that I mean that there were -- you know, there`s this
contingent of younger freshman congressmen who don`t really get how the
system works. And I don`t use that term "system" in a negative way.

John Boehner, the speaker of the House, has always had a strategy. He
tried unsuccessfully to convince his members to come along with him. That
strategy was with a much longer view. And these younger guys who came in
just this last election, in 2010, wanted to fight, wanted to fight, wanted
to fight. And their sense of things is that, If we fight, then we win,
even if we lose.

And, of course, that`s sort of nonsensical. But it`s clear they did
lose. And -- and what I`m hearing from the speaker`s office is that some
of these folks have now seen the light, and they understand now that they
did approach things incorrectly, at least tactically.

Now, the speaker himself made a conscious decision, clearly, to lead
his conference where they wanted to go. And that was not what he wanted to
do, but he was preserving unity within the ranks, rather than -- rather
than allow a civil war to erupt. So, that`s where they are.

Congressman, he seemed to follow a pattern -- I`m not knocking Obama
here -- but sort of leading from behind. He waited, he waited, he waited
until it was clear he had no alternative but to pass a bill through the
whole House to save us from a default. Do you think that was the best
strategy available for him to keep the party together, to keep his
speakership?

PARKER: Well, I think that was the only strategy.

(CROSSTALK)

PARKER: I`m sorry. Am I interrupting? I didn`t realize.

MATTHEWS: Yes. Well, it`s not your fault, but I`m going to go to the
congressman.

PARKER: OK. OK.

(CROSSTALK)

MATTHEWS: I`m sorry.

Go ahead.

STEVEN LATOURETTE (R), FORMER U.S. CONGRESSMAN: I`m sorry, Kathleen.

I would just like to continue with your "Animal House" theory. My
favorite line is when he says, was it over when the Germans bombed Pearl
Harbor?

And it`s not over now. And it`s not over for those that are writing
the obituary of the Republican Party. But we are going to have a robust
conversation. The speaker did what he had to do. He is -- people who
criticize him need to remember he is the elected leader of the Republican
Conference.

And they told him to -- that they wanted to engage in this idiotic
strategy that had no chance of success. I called it the Bataan Death March
to nowhere.

(LAUGHTER)

LATOURETTE: And so he played that out I think in an attempt to show
them how stupid it was.

And even Tuesday, this Tuesday, he came up with not one plan, but two
plans to help them save them from themselves. And they rejected it. And
they -- what do you expect? He made it clear he`s not going to let the
nation default. He thought that the shutdown was stupid. He`s an
institutionalist. He`s a governing guy. And he was going to open it back
up.

MATTHEWS: OK.

Immediately following last night`s vote, the far right had its
pitchforks out for Republicans up for reelection come next year who
supported the bill at the end. And they named names here. Erick Erickson
from RedState.com said -- quote -- "Men like Mitch McConnell, John Cornyn,
Eric Cantor, Kevin McCarthy and others have preached a great sermon against
Obamacare, but now conservatives who supported them see that these men have
refused to actually practice what they have been preaching."

And Sarah Palin targeted four Republican senators on her Facebook wall
all up for reelection in 2014 and facing Tea Party challengers on their
right flanks -- quote -- "Rest well tonight, for soon we must focus on
important House and Senate races. Let`s start with Kentucky, which happens
to be awfully close to South Carolina, Tennessee, and Mississippi."

Kathleen, I just wonder whether which way -- who`s winning this fight,
the hard right of Ted Cruz and company and that posse, or the regulars, the
people who were calling for regular order at those meetings in the last
couple days?

PARKER: Well, the big question, Chris, is what happens in the
primaries.

The candidates who can win the primaries in these conservative
districts are not the people who can win in general elections.

MATTHEWS: Yes.

PARKER: And they`re not the people who represent the larger
population in this country, which is, as you know from the recent NBC, was
it "GQ" -- I`m afraid I might misname the poll.

(CROSSTALK)

MATTHEWS: "Wall Street Journal," I think. It was the big one, yes.

PARKER: Well, most people identify as centrist. There`s this broad
middle that is really very tired of all this nonsense. And I think the Tea
Party is much less representative of the country as a whole.

So we will see. I know that the Republicans are working very hard to
recruit. When I say the Republicans, the rational ones who are really
interested in winning, who are really interested in -- in long-term
strategies and trying to get things done for the country, rather than just
winning the little battles along the way.

They`re trying to recruit candidates who not only can win the primary,
but can also appeal to a more general audience. So, we will see.

MATTHEWS: Congressman, do you -- excuse me.

Congressman, do you know what I thought was an interesting poll that
just came out? Fifty-one percent of the Republican Party, your party, said
the Tea Party is not part of the Republican Party. It`s another
organization. It may be coincidental with Republicans, but it`s not part
of the party itself.

LATOURETTE: Well, I read that it is not the Republican Party. It`s
the Tea Party. And they`re activated by the -- most of them tend to be
Republicans, but they don`t speak for the party, even though they think
that they do on a regular basis.

To Kathleen`s point, what we`re trying to do in our new little
enterprise at Main Street is to recruit people. We have one litmus test.
And that is you not be crazy.

(LAUGHTER)

LATOURETTE: And we will support you against some of these people in
these primaries. And...

(CROSSTALK)

MATTHEWS: How do you do that? What kind of test do you do? Do you
sit -- do you put weights on them and see if they float or one of those
things?

LATOURETTE: ... and not spew "Repeal Obamacare," they`re in. And
we`re going to get behind them.

(LAUGHTER)

LATOURETTE: But, you know, this is going to be a fight between now
and 2016 where noses are going to get bloodied.

But we have got to have this fight, because these folks are taking the
-- they`re hijacking the Republican Party. I was -- represented a -- a
Democratic district for years. And I go to doors, and they say, I`m going
to vote for you because I didn`t leave the Democratic Party. They left me.

And I didn`t know what the hell they were talking about. Today, I
know what the hell they were talking about.

MATTHEWS: Well said, sir, for you. Anyway, thanks for coming on,
Steve LaTourette, the former congressman, and Kathleen Parker, the great
columnist with huge numbers that carry her column out of "The Washington
Post."

Up next, the metaphor to end all metaphors about what Steve -- well,
Ted Cruz is up to.

And this is HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: Back to HARDBALL. Time for the "Sideshow," of course.

You probably noticed that the drama that unfolded on Capitol Hill over
the last two weeks inspired many to use creative analogies to describe
certain obstructionists in the Republican Party.

CASTELLANOS: But the boom produces a bust. They press their food
supply. They invite predators. Right now, Ted Cruz, what he`s doing feels
good. He`s growing his supporters. It`s leading the Republican Party I
think into a bust.

COOPER: You`re...

(END VIDEO CLIP)

(LAUGHTER)

MATTHEWS: Well, next up, former New York mayoral candidate Anthony
Weiner is in the latest issue of "GQ" magazine.

In it, he laments that his sexting scandal distracted the media from
his policy proposals. Hmm. And, as any candidate who has lost a big
election knows, it`s easy to get hung up on the what-ifs. What if I had
done this or that differently? Then maybe, just maybe I would have won.

But Weiner`s what-if is a little different. Quote: "Maybe if the
Internet didn`t exist, like, if I was running in 1955, I would probably get
elected mayor."

If only. I guess he can blame the whole thing on Al Gore for
inventing it.

BRIAN WILLIAMS, ANCHOR, "NBC NIGHTLY NEWS": Congressman Gohmert of
Texas called you an al Qaeda supporter, and it hardly made a blip in all
the talk.

SEN. JOHN MCCAIN (R), ARIZONA: Well, on that particular issue,
sometimes, those are -- comments like that are made out of malice. But if
someone has no intelligence, I don`t view it as being a malicious
statement.

(END VIDEO CLIP)

(LAUGHTER)

MATTHEWS: "If someone has no intelligence, I don`t see it as a
malicious statement" -- what a great, appropriate putdown by Senator
McCain.

Up next: The Republican shutdown may give Democrats something they
didn`t think they had, a chance to win back the House next time.

That`s coming up next here on HARDBALL. And this is the place for
politics.

And check this out, a bluff in Washington caught on video crumbling
into the ocean. Wind and rain are slowly causing the cliff to disappear.

I`m Veronica De La Cruz -- now back to HARDBALL.

MATTHEWS: Welcome back to HARDBALL.

It took 16 days of a government shutdown, of course, and a near
default for House Speaker John Boehner to summon the guts or nerve, you
might call it, to stand up to the Tea Party. Up until last night, Boehner
gave into Tea Party demands at every turn. It was a strategy aimed at
somehow keeping the two fractured wings of his caucus, Tea Party vs.
establishment, together. Well, it hasn`t.

As I mentioned earlier, a new Pew poll found that a majority of
Republicans, 51 percent, see the Tea Party now as separate from their own
party. Only 32 percent view the Tea Party as part of the Grand Old Party.

Well, Representative Charles Boustany, a Republican from Louisiana,
echoed that sentiment during an interview with "The National Journal,"
saying -- quote -- "There are members with a different agenda and I`m not
sure they`re Republicans and I`m not sure they`re conservative."

Well, with the GOP fractured and the Tea Party showing no signs of
surrender, the fault lines within the GOP may only get worse. Who knows.

Well, anyway, so far it`s meant a windfall to Democrats in the
national polls. According to a recent NBC/"Wall Street Journal" survey,
the public wants a Democrat-controlled Congress in 2014 by a margin of
eight points. It was just a three-point margin a month ago.

Well, Congressman Steve Israel is a Democrat from New York. He`s also
chairman of the Democratic Congressional Campaign Committee.

Congressman Israel, the problem you face is that you have got -- you
have got to pick up -- well, what is it? How many seats do you need right
now to pick up a majority?

MATTHEWS: And you face the historic problem of gerrymandering and
other -- you have to have like a six-point advantage, percentage advantage,
even to break even, right, because of the way the districts gerrymandered,
et cetera, right?

What kind of a spread do you need in generic to win?

ISRAEL: Well, look, even after redistricting, Chris...

MATTHEWS: Six points?

ISRAEL: Even after redistricting, we will have about 50 to 55
Republican seats in play.

We`re going to defend about 20 incumbent Democrats. But there`s going
to be 50 to 55 districts in play. And what`s happened over the past two
weeks or so is a sea change. The generic has spread anywhere from four to
10. Of the top 24 most competitive districts in the country, a generic
Democrat is now ahead in 21.

And why is that? This shutdown may have improved our prospects
towards winning the House, but it has damaged the economy. It cost the
economy $24 billion.

MATTHEWS: Let me ask you about recruitment, because you know, I think
I know, that the best candidates tend to win. So, if you get the best
candidates in the field, usually the local mayor, someone who is a state
senator with a good record, someone who is maybe a celebrity of some kind,
you have got to better chance than if you run, say, a state rep, someone
with not a -- without a lot of profile.

How`s it going on recruitment, given what`s been going on the last
several weeks?

ISRAEL: Well, actually, we have had a bit of a recruitment surge as a
result, because people are just sick and tired, they are fed up.

And so these are not legislators. We have problem-solvers. We have
people who are entrepreneurs. They know that you can`t run a business by
shutting the business down. You can`t expand your local economy by going
into default. And so they have stepped up to the plate. And we have
people who we had asked if they were interested in running several months
ago. They weren`t sure. They didn`t see a path.

Now the door is open, and they`re actively considering this path. We
have one in Omaha, Nebraska, City Councilman Pete Festersen, who is a
problem-solver. He knows there`s no Republican or Democratic way to pave
the streets, as your excellent book just talked about, the book that you
just published.

MATTHEWS: Thank you for that.

ISRAEL: And now he`s -- you`re welcome.

(LAUGHTER)

ISRAEL: And now he`s decided to run because he`s sick and tired of
the recklessness and the irresponsibility.

MATTHEWS: How do you go into the suburbs, where the Republicans have
been pretty good -- and we`re going to talk to Congressman Grimm from
Staten Island and Bay Ridge, New York and different places like that that
are sort of middle-class -- they are middle-class people and working-class,
possible Democratic pickups.

And how do you go into places like Delaware County with Meehan or
Fitzpatrick up in Bucks County, when these people at least saved their
keisters in the last several hours by voting with the leadership? How do
you go against people who have said, I`m on the record opposing the Tea
Party people?

ISRAEL: Do they really believe -- they really believe you can fool
awe all of the people all of the time?

Look, these people who ran back to their districts today and said,
look, I was always for a clean vote to end this, to reopen the government
and not to default, they had 16 opportunities in 16 days to join Democrats
in opening the government and avoiding default.

They chose 16 opportunities in 16 days not to step up to the plate.
So they`re not innocent bystanders in the near default of the American
economy. They were enablers and they were empowerers. And we`re going to
hold them accountable for those decisions.

MATTHEWS: OK. Thank you so much, Congressman Steve Israel, who runs
the Democratic Congressional Campaign Committee, as well as representing
his own district.

Let`s go to Michael Grimm. He`s been on the show. He`s a friend of
the show. He`s from New York. He`s from Staten Island and Bay Ridge.

Sir, how do you answer that fact? Because you have been a -- you were
with the leadership, of course, yesterday in ending this stupid thing. I
think it was worthless. I will put my cards on the table.

Do you think it was worth anything, these weeks of government shutdown
and really endangering America`s standing economic in the world? Was it
worth to spend two or three weeks talking about Affordable Care?

REP. MICHAEL GRIMM (R), NEW YORK: Well, I`ve been very outspoken
about this. No, I don`t think anyone wins in this. I think that Congress,
as a whole looks bad. That`s the House and the Senate. The president
looks bad for not engaging in talks sooner.

MATTHEWS: Do you think they should have talked? OK. I`m going to
follow your thinking.

GRIMM: I do. I do. I think he`s the leader of the free world.

MATTHEWS: Do you think he should have talked about taking apart
Obamacare, taking apart what`s been passed into law?

GRIMM: No, no. No, but he has to be above the fray. He can sit down
with both sides in the room and say, listen, I`m not here to negotiate
Obamacare, but this is what I`m willing to talk about. The fact the debt
is continuing to grow and there`s no end in sight. That`s something
Republicans want to talk about.

So it`s not good enough when you`re the leader, you`re the president
of the United States of America, to simply say, well, because Obamacare was
on the table, I`m --

(CROSSTAK)

MATTHEWS: But that`s not what your leader did, even Mr. Boehner, who
I don`t dislike. Mr. Boehner would never -- he never challenged the hard
right of your party, you didn`t, and say, wait, stop talking about
Obamacare. It`s a not deal. It`s not going anywhere. We`ve got to talk
about spending and entitlements elsewhere, where this president might
behind a bit.

But I didn`t hear anything standing up. I never heard Boehner say --
his speech, by the way, two days ago was this is about Obamacare. He
talked about it as the issue in the front of us in terms of the government
shutdown. He did. He kept it right there. He didn`t say let`s talk about
something else like you just said.

GRIMM: There`s no question. And, again, look --

MATTHEWS: When there`s no question, you guys could have changed the
subject and you didn`t.

GRIMM: I`ve been very honest with you saying there`s blame to go
around all the way. You k now, I think the challenge for the Republican
Party now is how do we unite? And I think we unite by coalescing around
the ideals that we really believe in. That if we don`t come up with a
deficit and overall debt reduction program, then we are compromising the
real future of this country where we can`t just raise a debt ceiling, but
because we`re no longer credit worthy.

And what do we leave our children and grandchildren but a country that
has defaulted because we couldn`t pay our bills --

MATTHEWS: OK.

GRIMM: -- not because of political bickering but because we really
couldn`t pay our bills. I think that`s how we get our party back together.

(CROSSTALK)

MATTHEWS: OK. First of all, sir, I`m not against your re-election.
In fact, I love the fact that Bay Ridge and places like that which are
truly middle class and somewhat in the middle politically have Republican
representation frequently.

Let me ask you a question that was put in the poll. Do you believe
the Tea Party is separate from the Republican Party or part of it?

GRIMM: Well, I think it`s separate in a sense that it`s not the
mainstream GOP.

MATTHEWS: If you just had to answer that poll question, is it
separate from the GOP or part of the GOP?

GRIMM: No, I think it`s separate from the GOP. It`s its own entity.

MATTHEWS: You gave me my answer.

This is what I like on HARDBALL. You know, Congressman Grimm says Tea
Party separate from the Republican Party. Now, we`ve made some news
together. Thank you. And I like the answer.

The GOP`s kamikaze strategy has claimed more than just political
casualties on the right. $24 billion have been drained from the economy
according to Standard & Poor`s. Economic growth predictions have been
slashed. Consumer confidence saw its biggest decline since the 2008
bankruptcy of Lehman Brothers. And thanks to the short term nature of the
deal, the prospects of a credit downgrade are still alive out there.

And then there`s the untold human toll of all this. Thanks to the
shutdown, small business loans were stalled. Thousands of private sector
workers were furloughed, of course. And important military benefits were
shuttered. And the National Institutes of Health had to slash cancer
treatment trials. That`s just the tip of the iceberg.

Andrew Ross Sorkin of "The New York Times" is co-host of CBNC`s
"Squawk Box". And my friend Jim Cramer is host of CNBC`s "Mad Money."

Let me start with Andrew on this.

Can you put -- I guess it`s hard to put a price tag to some of this is
intangible. But --

ANDREW ROSS SORKIN, THE NEW YORK TIMES: Right.

MATTHEWS: -- it seems to me if you`re out there standing on the cliff
for awhile, people think you`re going to get in the habit of standing on
the cliff and one of these days, you`re going to fall. So, I project this
forward as a question to you. Projecting forward in this tendency of
Americans watching us from Tokyo or from Beijing or anywhere else, the fact
that we`re willing to go out there like on the Cliffs of Moher over in
Ireland, and dance around like hot shots 20-year-olds like it`s not 200
feet to your death -- is that sending word to the world out there, you
know, we`re kind of nuts?

SORKIN: A hundred percent. We are nuts. We`re completely nuts. And
we`re getting more nuts.

And, frankly, what I worry about over the next couple of months as we
figure out whether we get a grand bargain or we don`t, whether the rest of
the world will think we`re nuttier than ever. You know, you cited the $24
billion number, other people have different numbers. I think this has been
a huge -- there has been a huge world of hurt going on here across the
economy and you`re feeling it everywhere.

We`ve had all sorts of CEOs on over the past couple days. And some of
the earnings reports are starting to suggest that. What worries me more,
however, is actually that over the next three months, nobody`s going to do
business, because nobody knows what is about to happen. And nobody knows
whether there`s going to be some kind of wild, as you said, kamikaze game
that happens all over again and what that means.

Now, on the other side, I will say one thing -- there are going to be
some companies that will try to play through this and are going to try to
say, you know what, we can see through this, because we know everybody`s
crazy, but we also know that, ultimately, there`s some kind of strange
rationality that happens at the end of the game.

MATTHEWS: Let`s talk, Jim Cramer and I, about the two-faced nature of
some people who are experts, who know more than I, maybe somewhere about
what you know, but as much as you know. I remember during the O.J. trial,
we`d have lawyers on, I`m not naming names, and who had come on and tell me
in the back room that the guy is guilty, and then they`d get on television
and say he`s innocent as hell because they`re criminal lawyers, they need
customers, they need clients, I understand that.

I have in the past couple of weeks come across people, without naming
names again, who I know are smart. They say, don`t worry about this debt
default. It`s all nonsense. And I think, are they telling their clients
that? Are they telling -- is this something they take into the classroom
if they`re in academics? Why do people change their analysis based on
where they`re sitting politically at that moment?

JIM CRAMER, CNBC: Did Senator Cruz`s wife tell Senator Cruz? Because
she`s at Goldman. Goldman was telling people, listen, we could be in a
heap of trouble.

MATTHEWS: I don`t know.

CRAMER: I mean, Goldman was probably the most out there saying that
this could be really dangerous.

MATTHEWS: Can pillow talk lie? I don`t know. Ha! I don`t know.

CRAMER: All I know, Chris, is that people I dealt with were saying,
Jim, do you know what will happen? I don`t know what`s going to happen.
These are people who run trillions of dollars. No one knew, but we knew it
was going to be bad.

MATTHEWS: Yes, but why did the people say it wasn`t? What was in --
I was on television shows recently, people have seen me with them, and they
come out and say right to your face, it doesn`t matter, when common sense
tells you, I might default on what I owe you.

CRAMER: I think people are either afraid or they don`t want to cause
panic. A lot of people are afraid of Washington, Chris. I dealt with a
lot of CEOs. I said, guys, why don`t you go down and straighten these
people out? Tell them how bad it`s hurting. And they said, you know what,
maybe we need a favor some day and we can`t go calling it.

MATTHEWS: OK.

Let`s go back to Andrew. Is it possible we read something in all of
this, that everybody learned something? I know this will sound cruel, but
I know a lot of people on the right, left, and center say that government
shutdowns are bad, but they`re not catastrophic. And they`re not trying to
get in January, is what I`m suggesting.

SORKIN: That`s the danger point. The danger point is actually that
we didn`t learn anything and that we repeat this all over again. And at
some point -- maybe we don`t default -- but at some point, our lenders, the
people who lend money to our country, including people here in China and
everyone else are going to say, these people, I`m not sure they`re good for
the money, or I`m not sure they`re going to be good for the money when they
say they are.

And that unto itself is a problem.

MATTHEWS: OK.

SORKIN: Because it means all of our costs are going to go up.

MATTHEWS: How about the pilot on the plane here, flying to Hawaii,
and they say, it`s only "High and the Mighty." I know Jim saw that movie,
with John Wayne. On the way to Hawaii, the pilot announces when you`re
about 100 miles from Hawaii, he says, we might be out of gas, I`m not sure.
I`ll let you know. We might be able to land, but I`m not sure, because we
might be out of gas and we`re going to have to dive into the ocean, you`re
all going to get killed.

I mean, how many times, Jim, can you put that word to the passengers
and they still get on the freaking plane again? I wouldn`t get on that
plane again?

CRAMER: It`s not the full faith and credit, it`s the partial faith
and credit. It`s the partial faith and a lot of credit.

I mean, the Japanese, they don`t know where to go. The Chinese, they
don`t know where to go, but Chinese were really angry.

And I`ve got to tell you, these are smart people. And they will
figure out over the next five to seven years that this is the British
pound. And we are the pound sterling and it`s 1956.

And you know what? We don`t need to be with them anymore.

MATTHEWS: OK. Let me get back to you, Andrew, the business party.
We all grew up with that, the Republican Party is the party of business.
My dad who was a Republican said he didn`t like when there was price
fixing. He said they betrayed the good creed of American about competition
and free enterprise, because at their best, the Republicans are the party
of free enterprise, but not in the bag with the corporate interest, per se.

Does this break that alliance between big capital and the soddy
busters on the right?

SORKIN: Oh, 100 percent. If you talk to the people in the Chamber of
Commerce or the Business Roundtable, they are furious with the party. They
don`t know what to do.

There is part of them that desperately wants to try to put up other
candidates against people, like a Ted Cruz. He`s not up -- he`s not going
to be up anytime soon, but they desperately want to do that. But they`re
so worried that if they do, it will just have a backlash effect.

So they`re trying to figure out, where do we place our bet? Because
this group is not helping us. On the other side, I will tell you this, I
don`t think anybody in the business community has said, oh, my goodness,
I`m going to become that Democrat tomorrow.

(CROSSTALK)

CRAMER: I don`t know about that! I actually heard CEOs say, I hope
the Democrats win in Congress. I hope the House goes Democrat. These are
CEOs.

MATTHEWS: We all know -- we all know Wall Street is packed with
people that don`t vote their economic interests. There are a lot of
liberals out there, Jim Cramer, who vote for higher tax rates to the top,
they vote -- they may vote for free trade. But basically, every time they
get up in the morning, they vote against themselves economically.
Republicans are more consistent. They vote their economic interests.

What`s this going to do to shake this thing up? Are we going to find
a war on the Republican side where they start voting their economic
interests against the Republicans?

CRAMER: Look, the Republicans that are in this third party, which I
think is really not part of the regular party, they`re anti-business. You
have to be anti-business. For all the things that Andrew Ross Sorkin said,
all the things they`re doing that are insane, that`s how you hurt business.

Look, they are anti-business. They may not think they are, but they
are.

MATTHEWS: We`re going to have you guys back. I think it`s an ongoing
discussion, this rift in the Republican Party. This rift may be real for a
long the time coming. Because I think the grassroots are really anti-
establishment. They are at least in their rhetoric, populist.

Anyway, Andrew Ross Sorkin of "The New York Times" and CNBC, and Jim
Cramer, my good buddy from Philly.

And we`ll be right back after this.

(COMMERCIAL BREAK)

MATTHEWS: Let me finish tonight with this.

Tonight, we mark the end of what is being called round one in the war
between those who believe in the cause, that roaring, seething group of
Obama opposers and the rest of us. It`s a war, as they see it, to win back
control of the country from the "them" who supporters have voted for
President Obama.

But it`s not supposed to be this way. One battle after another
between those who support the regular order of government, debate,
decision, compromise, agreement, and those who want to sabotage it. I`ve
lived and worked for 40 years in the inside of government or nearby, to
positive, constructive democracy. I`ve written about it in my new
political coming of age memoir, "Tip and The Gipper: When Politics Worked."
I never knew that that book coming out just now would be so relevant, such
an upbeat, enjoyable, antidote, if you will, to the times we`ve just been
living.

And that`s HARDBALL for now. Thanks for being with us.

"ALL IN WITH CHRIS HAYES" starts right now.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY
BE UPDATED.
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